Inventory Turnover Ratio: Formula, Calculation, and What It Reveals
Warren Team
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Key terms
- Inventory TurnoverA financial ratio that measures how many times a company sells and replaces its inventory over a specific period, indicating how efficiently the business manages its stock. A higher inventory turnover generally suggests strong sales and effective inventory management, while a low turnover may indicate overstocking or weak demand. It is calculated by dividing cost of goods sold by average inventory and is particularly important for retail and manufacturing businesses.
- Debt-to-Income Ratio (DTI)The percentage of your gross monthly income that goes toward paying debts. Lenders use DTI to assess your ability to manage monthly payments and repay borrowed money.
- Expense RatioThe annual fee that all funds or ETFs charge their shareholders, expressed as a percentage of assets. Lower expense ratios mean more of your money is invested rather than going to fees.
- Loan-to-Value Ratio (LTV)The ratio of a loan amount to the appraised value of the property, expressed as a percentage. Lower LTV ratios typically result in better loan terms and may avoid PMI requirements.
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